The IRS strikes at transparency -- and at the poor

Why release data on audits for the rich when you can be robbing the poor of their tax refunds instead?

Published January 11, 2006 1:56PM (EST)

It would be easy to miss them amid all the attention paid to the Alito hearing and the Abramoff scandal, but New York Times reporter David Cay Johnston has just produced a pair of must-read stories about the way the Internal Revenue Service works under George W. Bush.

In the first of the stories, Johnston reports that the IRS has stopped releasing information that shows "how thoroughly" it audits "big corporations and the rich" and how deeply it discounts the taxes it assesses after such audits. For decades, Johnston says, the IRS has made this information available to a Syracuse University professor who has, in turn, made it available to the public. But in May 2004, the IRS said it would no longer provide this information, despite a 1976 court order that required it to do so.

The information clampdown shouldn't come as a surprise to those familiar with the way the Bush administration views government transparency. Over the last five years, the administration has, among other things, eliminated statistics on global terrorism from the State Department's annual report on global terrorism; deleted data about racial profiling from a report about racial profiling; and tried to discontinue a Labor Department report on layoffs. In each of those cases, the administration moved to shut down the information flow when the data to be released would have been politically embarrassing. The IRS insists that it is withholding the audit information only out of concern for the costs of providing it. But anyone care to wager that, if and when the IRS faces a new court order to release the information, we'll begin to see some other reasons that the Bush administration didn't want to release this information anymore?

Speaking of which , Johnston's second story hits another subject that the IRS would probably rather not have the public discussing: The IRS's taxpayer advocate, Nina Olson, told Congress this week that the agency has devoted what Johnston calls "vastly more resources to pursuing questionable refunds sought by the poor -- which under the highest estimate is $9 billion -- than to the $100 billion in taxes not paid each year by people who work for cash and either fail to file tax returns or understate their income."

Along the way, Olson told Congress that the IRS has, over the last five years, frozen tax refunds owed to 1.6 million poor Americans. Most of those filers had claimed the earned-income credit, and most had done absolutely nothing wrong: A sampling by Olson's staff found that 66 percent of the Americans whose refunds were being withheld as "fraudulent" were entitled to the refunds they sought -- or even more. The amount of money involved isn't insignificant, at least to the families that aren't getting it. Olson's study found that that the average annual income reported on the frozen returns was $13,000. The average frozen refund was $3,500.

By Tim Grieve

Tim Grieve is a senior writer and the author of Salon's War Room blog.

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